Berliner Cohen recently obtained dismissals of a trio of Labor Commissioner actions using an innovative strategy on behalf of its employer clients. Merging the firm’s expertise in employment, business and bankruptcy law, Berliner Cohen attorneys Laura Palazzolo and Jennifer Leung successfully argued that the failure of a former employee to disclose the existence of a purported claim against the employer in his or her bankruptcy filings, warranted the dismissal of the subsequent administrative complaint.
In these three cases, the former employee/claimant had hidden his or her claim for allegedly unpaid wages from creditors, by signing disclosures of assets under penalty of perjury which failed to list the unpaid wage claim. Thereafter, the employee/claimant asked the Labor Commissioner to order the employer to pay those allegedly unpaid wages.
Berliner Cohen relied on a “judicial estoppel” theory – arguing that the claimant should not be able to tell one court one thing, then turn around and tell the next court, the opposite. The Labor Commissioner agreed and dismissed the claims. In these cases, the former employee/claimants each argued that the employer should not receive a “windfall” as a result of the claimants allegedly “inadvertent error” in failing to identify his or her claims on his or her bankruptcy forms. But as one Hearing Officer wrote in his Notice of Dismissal: “The purpose [of judicial estoppel] is to protect the integrity of the judicial process and not the parties of the lawsuit…There is good reason for creditors in bankruptcy to expect the debtor will disclose potential litigation. The law and fairness demand such disclosure. Creditors and the bankruptcy court must rely on the integrity of the debtors in order for the bankruptcy system to successfully function.”
Further information regarding this matter may be obtained from Laura Palazzolo, Bankruptcy and Creditors’ Rights Practice Group, and Jennifer Leung, Employment Law and Litigation Practice Group at www.berliner.com.